FLOST referendum: Here’s everything you need to know

This November, Athenians will vote in a referendum on FLOST, a new 1% sales tax specifically designed to lower property taxes. If FLOST is voted down, nothing will change. If it is approved, all of the money it raises will go towards reducing property taxes for homeowners, landlords and businesses alike.

While the vote itself is a simple ‘yes’ or ‘no,’ the implications are complex. In this article, I will explain what FLOST is and what it would mean if it passes. I’ll also run over a few scenarios to show how FLOST might impact the pocketbooks of hypothetical Athenians.

What is FLOST?
Who benefits from FLOST?
How FLOST might affect you
The pro-FLOST argument
The anti-FLOST argument

What is FLOST?

FLOST, which stands for floating local option sales tax, is a sales tax program similar to ESPLOST, which raises money for the school district. ESPLOST also happens to be on our November ballots.

Both FLOST and ESPLOST are 1% sales taxes applied to nearly everything purchased in Athens (with limited exceptions). They last for a period of five years before they would need to be re-authorized by the voters. Each would raise around $215 million. If both referendums are approved, the sales tax in Athens would increase to 9%.

The main difference between the two taxes is what the money would be spent on. 

If ESPLOST is re-approved by voters, the ACC School District would use the money for things like renovation of schools and athletic facilities, purchasing new school buses, educational technology and other capital investments intended to further our children’s education. 

If FLOST is approved, all of the money it raises would go towards one thing and one thing only – reducing property taxes.

So FLOST won’t raise any net revenue for the local government at all?

The question of whether FLOST actually raises money or if it just redistributes the existing tax burden is not an easy one to answer, so bear with me.

Legally, FLOST is revenue neutral*. There aren’t any construction programs associated with it. No government spending is tied to it. If approved, all $215 million raised by FLOST would go into a separate account that can only be used to lower property bills dollar for dollar. It cannot be used for anything else.

FLOST is “floating” in that the amount of property tax relief it provides would vary year by year based on the amount of sales tax collected. Based on 2026 numbers, FLOST would lower the local government’s property tax millage rate by a massive 4.42 mils (from 12.25 to 7.83). That’s a 36% reduction!

While property taxes levied by the school district won’t be affected, the total tax bills that property owners pay would likely go down by around 11 percent. Yes, that’s correct – the actual property tax bill that you have to pay will almost definitely go down if FLOST passes!

While all this is true, the ultimate effect that FLOST is likely to have remains quite complicated. Moving beyond the surface level, our next step is to consider how the mayor and commission might react when they see a large pot of FLOST dollars sitting around as they craft the yearly budget. More on this below.

Who benefits from FLOST? Who doesn’t?

If we assume for a moment that this sales tax program is, in truth, revenue neutral (as it legally must be), it gets easier to explain. In this case, what FLOST would do is transfer part of the burden of paying for local government services from one group of taxpayers to another. As you consider how to vote on FLOST, know that it is mostly a question of who should pay for the things we all need to keep our government functional.

If FLOST passes, there will be winners and there will also be losers.

Generally speaking, the winners of FLOST would be people who own property in Athens: homeowners, business owners and landlords. While it’s true they would have to pay an extra 1% on local purchases just like the rest of us would, these property owners stand to gain more in property tax relief then they’d probably pay from the extra sales tax.

The losers of FLOST would be people who tend to spend a high percentage of their income on local goods and services (or on internet sales, which FLOST would also tax). Students, visitors from out of town and people who don’t own property would all pay the 1% sales tax like everyone does, but they may not benefit much, if at all, from the property tax relief.

More concerningly, there’s also another kind of person who stands to lose if FLOST passes.

The regressive nature of sales taxes

People in poverty and those with low incomes would also end up as net losers of FLOST. That’s because sales taxes are structurally regressive, as Dr. Alex Combs, UGA professor of public administration and policy, explains.

“Low-income households end up paying a higher share of their income [in sales taxes] than high-income households do, because a higher proportion of their income goes to taxable goods and services,” Combs told APN.

Low-income folks don’t have much money, but the money they do have is almost all going to be spent locally and therefore would end up being taxed by FLOST. People with very low incomes might spend everything they earn on food, clothing, transportation and other necessities, meaning FLOST could take a full 1% of their income. That’s much more than FLOST would take from wealthy people, who travel more and still manage to save a substantial portion of their incomes.

Jetting off to Hawaii, going skiing for a weekend, buying stocks or saving for retirement: these are all things that rich people spend money on and none of them are taxed by FLOST. Sales tax is also not charged on rent or SNAP food assistance purchases, but it’s charged on most everything else.

Property taxes can also be regressive

At the local level, the alternative to sales taxes are property taxes. While we know that sales taxes harm the poor, the unfortunate truth is that property taxes also tend to be regressive, if for different reasons. According to Combs, that’s because expensive homes are harder for tax officials to assess accurately.

“That assessment, that effort to value property, tends to be regressive,” Combs told APN. “High-value homes tend to be assessed lower, compared to what they’re worth on the market, compared to low-value homes. It’s more difficult to accurately assess high value homes. They sell less frequently, so assessors have less data. Low value homes turn over more frequently and tend to be more uniform, which makes them easier to evaluate.”

Making matters worse, recent research shows that the burden of property tax can sometimes fall on the shoulders of people who don’t own any property at all.

It’s no secret that landlords don’t like paying property taxes. They tend to pass this cost along to renters when market conditions allow. One recent study by economist Sarah Baker at the Federal Reserve Bank of Philadelphia found that landlords in California passed along 50 to 89 percent of a certain kind of property tax increase to renters from 1980 to 2022.

However, landlords probably aren’t as likely to pass along the benefits of a property tax decrease to renters, which is what FLOST represents.

“It would be unexpected for [rent] prices to decline [as a result of FLOST],” Combs said. “You’ve already set this price point and the market has adjusted. As long as there is demand – as long as you’re not sitting on empty properties because your prices are too high – there’s really no incentive to lower your prices.”

Even so, Combs did say that it was possible rents in Athens might rise at a slower rate going forward if FLOST were to pass.

How FLOST might affect you

Let’s go over some hypothetical examples of how FLOST might affect people in different living situations at different income levels. Please take these examples with a grain of salt; they’re intended to give a rough idea of some of FLOST’s effects but they’re not comprehensive and may not fully represent the reality that people experience.

In these examples, I’m going to assume that landlords will eventually pass along some of the tax benefits that FLOST provides to renters.

Andrew, an unhoused Athenian

Ever since he lost one of his part-time jobs, Andrew has been unable to pay his rent and eventually ended up living in his car or on a friend’s couch. He makes about $10,000 a year but spends all of that on goods taxed by FLOST. If FLOST passes, Andrew would pay an extra $100 a year in sales tax, or 1% of his income.

Barbara, a working mother

Barbara works hard every day to get the money she needs to pay her rent and care for her child. She makes $25,000 a year and pays $1,000 a month in rent. She spends everything she earns. She ends up being taxed by FLOST on about 40% of her income (primarily since rent isn’t taxed), which amounts to $100 a year, or 0.4% of her income. In future years, she’ll eventually end up saving about $50 a month on rent due to the property tax relief. Even so, Barbara remains a FLOST loser, having to pay 0.2% more of her income in taxes.

Carter, a huge Dawgs fan

Carter lives near Atlanta but comes into Athens often, especially on game days. He makes $100,000 a year but spends $10,000 of that in Athens on his various trips. All of that is taxed by FLOST. He doesn’t own any property in Athens, so Carter is a FLOST loser. He pays $100 more a year in sales tax, or 0.1% of his income.

Diana, a struggling homeowner

Diana is a retired homeowner who receives $1,200 a month in Social Security benefits, her only income. She owns a modest home that’s worth $250,000 which she struggles to pay the taxes on every year. Besides her tax payments, most of her expenses end up being taxed by FLOST. While she finds that she spends an extra $100 a year because of the extra sales tax, Diana is a FLOST winner because her property tax bill is $330 dollars lower. She nets $230 a year from FLOST, effectively gaining an extra 1.6% income.

Evan, a comfortable homeowner

Evan makes $100,000 a year and owns a nice house in Athens worth $500,000. Since he’s saving for retirement and spends a significant amount on vacations every year, FLOST ends up taxing less than a third of his income. He’ll have to pay an extra $300 a year in sales tax because of this. Even so, Evan is a FLOST winner because his property tax bill ends up being $788 less. Evan nets $488 a year from FLOST, effectively gaining an extra 0.49% income.

Fiona, a wealthy landlord

Fiona makes a million dollars a year, in part because she owns several apartment buildings in town. She is out of town often and therefore only ends up spending twice the amount locally that Evan does. While she’s not happy about the $600 extra a year she has to spend in sales taxes, she voted ‘yes’ on FLOST anyway because of the massive amount she stands to gain in property tax relief. Across her various properties, Fiona ends up saving $35,400 on her tax bill, or 3.54% of her income, making her FLOST’s biggest winner. She decides to hold off on any rent increases for now, effectively sending $12,000 a year back to her tenants, but she still gains $23,400 from FLOST, or 2.34% of her income.

How you should vote

If you see yourself reflected in any of the hypothetical examples above, you might already know how you’re voting. But I’ll lay out the pro-FLOST and anti-FLOST positions as best I can, in case you’re still not sure.

The pro-FLOST argument

If you own property in Athens and aren’t overly concerned about those who don’t – it’s a no brainer, vote YES on FLOST. Nothing I’m about to say changes that.

But there’s a big reason to vote yes that I haven’t talked about yet. Let’s finally address the giant asterisk in the room: FLOST is not entirely revenue neutral.

How can I say that? Well, let’s take a look at it from the government’s perspective. The mayor and commission is not going to sit around during budget negotiations and completely ignore the millions of dollars tucked away in the FLOST account while, at the same time, being desperate for funding to address any number of deficits in critical infrastructure and other important things that we need money for as a community. That’s not going to happen. Or at least, I’d hope it wouldn’t happen.

Raiding the FLOST fund is illegal, of course. That’s not the way this works. But what might happen is that the mayor and commission could raise the millage rate slightly when they wouldn’t have otherwise done so, letting them take advantage of the fiscal space FLOST provides. This would still allow FLOST to provide homeowners with (in some cases) much needed tax relief. If this happens, the winners of FLOST will still be winners, if less so, but the local government would also get the funding it currently lacks to address important community needs.

Once you look at it like this, you realize that FLOST is a win-win (for some of us, at least), as long as commissioners capture some of its revenue for the community.

Without FLOST, the ACC Commission could eventually be forced to raise the millage rate, or, perhaps even more concerning, they might cut vital services. That’s because the same legislation that authorized FLOST, HB 581, also capped home valuation increases to the rate of inflation, a move that will slowly defund local governments and school districts across the state.

The local government needs to get some of that money back! Unfortunately, given the political situation, FLOST might be the only way to do it.

As you know, Mayor-Elect Dexter Fisher is scheduled to take over the highest elected office in the ACC government next year. If you followed his campaign at all, you’ll know that raising taxes is not on his agenda. Combined with the typical pressure from constituents to avoid raising taxes – which is enormous – I don’t anticipate a tax increase to come anytime soon in the Fisher administration. But lowering the impact of a tax reduction? That might be possible if the alternative is not being able to build the new courthouse, for example.

The impact that this new tax will have on the poorest among us is unfortunate. But Republican policies at the state level have made sales taxes the least-bad option we have available to us. Hopefully, we can reverse some of these bad policies soon, but in the meantime, vote YES on FLOST!

The anti-FLOST argument

Let’s get a few things straight. First, I want to point out that FLOST raising revenue is not a selling point for some people. If you’re a “starve the beast” conservative who wants to limit the amount that governments are able to tax, you should vote NO on FLOST. After all, FLOST is literally a new tax!

Second, I would argue that taxing the poor so that the wealthy can get relief is not just unfortunate, it’s immoral.

I can’t deny that being able to tax visitors is a huge benefit to Athens. I admit that there are some struggling homeowners out there who desperately need relief. But taking money from the unhoused and the working poor so the comfortable and the wealthy can get large tax breaks? That’s just wrong.

Is this really what we’re planning to do, Athens?

Yes, it’s true the local government has some deficits they need to make up somehow. That’s undeniable. It won’t be easy, or popular, but what they need to do to solve those deficits is raise the millage rate. Make property owners and landlords pay their fair share to keep our local government running!

Yes, I understand that some of that tax increase will get pushed off onto renters and the working poor. That’s always the way things like this seem to work. But some of those who have the least and who currently pay the most in sales tax already (as a percentage of their income) won’t suffer at all if property taxes are raised. And the wealthiest in Athens will pay the most if FLOST is voted down, as they should.

It’s unfortunate that some struggling homeowners may be forced out of their homes if property taxes are raised further. But given the other exemptions that ACC Tax Commissioner JP Lemay has available to help, this might happen to only a very few people, if anyone.

I’m not saying that voting down FLOST would come without a cost. But given the regressive nature of sales taxes, I believe that raising property taxes is the least bad option we have available to us. Vote NO on FLOST.

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